Regional Development in Italy: the North South Divide and the case of Calabria
Introduction
The way in which innovation takes place in a country - from the firm up to the national level - dictates the path of it’s regional development. The path toward high income status for countries in the West has been through movements of labour out of low productivity sectors like agriculture, and into high productivity manufacturing. Today, there is a shift towards high-skilled service industries and the knowledge economy as the nexus through which innovation takes place and drives growth. In Italy, regional inequalities have been exacerbated by a rise of high-skilled manufacturing and later services in the North and a lagging behind in terms of growth in the South. National-level wage setting focussed on industries in the North has resulted in a higher than optimal level of unemployment in the South, with wages set above the marginal product of labour. Lacking positive spillovers from highly dynamic industries, Calabria has fallen behind the national average in terms of regional GDP, and is seeing slower population growth than it’s neighbouring regions in the North.
This essay examines the way in which Calabria in Southern Italy has failed to keep pace with aggregate growth in the country through the lens of evolutionary economic geography focussing on four pillars of understanding regional growth: first, the timing of the adoption of general purpose technologies, second, the space along which comparative advantages were generated, third, the pace of structural change and fourth, the kinds of spillovers affecting efficiency within the region. The essay concludes by outlining a tool created to analyse these kinds of regional differentiations in Europe using data from the Rosés-Wolf database on regional GDP.
Context
Calabria is a region on the Southern tip of Italy’s boot, rich in history and fecund agricultural land. It is a producer of many geographically protected agricultural products including varieties of olive oil and cured meats (Piscopo et al. 2021; Romeo et al. 2014). It is the world’s largest producer of citrus oils used in food, beverages, and medical preparations (Navarra et al. 2015). Despite having a long coastline, three of the largest national parks in Italy and ample natural beauty, Calabria is not a popular tourist destination in Italy, evidenced by the number of tourist nights spent in each region in 2018, depicted below.
Figure 1: Italian regions by number of visitors in 2018. Source: The Italian National Institute of Statistics
Leydesdorff (2021) notes that in 2001, Italy moved to give regions more autonomy in managing their health, education, economic and industrial development. As a result, funding for innovation and R&D was sharply reduced in the South (Leydesdorff 2021). Further, Leydesdorff (2021) argues that when applying the innovation-systemness lens and the triple helix system to Italy, it is best conceptualized as two distinct regions - the North and South, rather than 20 administrative regions, concluding that different innovation strategies could be developed for the two parts of the country.
Medium and high-tech manufacturing and knowledge-intensive services are concentrated and integrated in the North of the country.
De Muro, Monni, and Tridico (2011) argues that while in Northern Italy there was a conscious drive to change the structural and institutional features of regions in order to bring about a new economic model premised on “development of an advanced tertiary sector and knowledge intensive services,” in the South, this economic model resulted in new forms of exclusion and a greater polarization between the core and periphery areas.
With regard to the kinds of spillovers that are possible,
Future trends: due to the macro-economic situation in Southern Europe, the support for regional subsidies to rural areas has decreased - Calabria will be forced to make its economic turn around on its own steam - the North and the European Union will not have sufficient knowledge and capability to drive this change (González 2011).
I should really have a look at the lectures to inform me about the important things in the second half of the course:
What does the context say?
4 pillars - Time, Space, Structural Change, Efficiency.
Time: what is technologically possible in historical context. Show what is available in terms of technology adoption in Italy versus rest of Europe with that dataset I had on technology adoption. Mail, Electricity, Steam, ICT.
Figure 2: Historical adoption of technologies highlighting Italy and the United Kingdom. Source: Historical Cross-Country Technology Adoption (HCCTA) Dataset from Diego A. Comin and Bart Hobijin
Space: Where is it possible at different points in time: regions are not isolated -
Show maps of shift out of agriculture over time. Maybe 4 panels looking at Europe.
Structural Change: industrial restructuring as a result of various pressures.
Reallocation of opportunities across local industries.
Need to focus on micro level phenomena rather than macro-level. Understand the industry dynamics. Look at evolutionary economic geography - what does space matter?
I should speak also about the kinds of industries that are successful in Calabria. What are the kinds of spillovers - there are those 3 right?
Regional inequality on the rise in Italy?
Look at North vs South line or map over time?
Other information
Financial Times article:
(https://www.ft.com/content/55cb175d-9a0a-4c05-b358-ca39fa365ceb)
“The worst affected are those living in the country’s south, in particular the most vulnerable, those living on the outskirts of cities and in rural areas and those engaged in Italy’s vast informal and undocumented economy”
Crux
Problem - wage setting determined by the North but lower marginal productivity means that the unemployment rate is higher in the South - see Enrico Moretti on this.
Boeri et al. (2019) Says that this is a problem.
Policy brief
The previous two sections have shown that Calabria has missed the boat with regard to diverting a large share of the workforce into high skilled manufacturing. The North has already diversified out of manufacturing for the most part and into services. Hence, Calabria and the South should focus on the comparative advantages that it does possess in order to capitalize on the services based economy of the future. Specifically, the mediteranean climate and relatively large share of land devoted to agriculture such as olives and citrus plantations mean that it is primed to become a larger tourist destination. In order to facilitate an increase in tourism, policy makers should take a three pronged approach. First, in order to incentivize carbon-consious travellers to make it further South along the boot of Italy, Calabria should investigate in improving the over-night rail connections between the hubs of Milan and Rome and the South.
Tool for visualizing the Roses and Wolf database on Regional Development in Europe.
I have built a tool to visualize the data that I made use of in this essay - as well as a bunch more. It is an interactive web app available here.
It looks like this:
You can see a stacked column chart depicting the sectoral shares of employment, a line chart of regional GDP and regional population compared to the national level, as well as a map that gives context on sectoral shares of employment in the surrounding regions.